Accounting Concerns of the Small Practitioner - Business Structure Guide

Sep 19, 2026

Accounting Concerns of the Small Practitioner provides practical guidance for small businesses on choosing an appropriate business entity and understanding key compliance obligations. It compares single member LLCs, partnerships, S-corporations, C-corporations, and LLCs, covering tax filing responsibilities, pass-through rules, liability considerations, and operational details such as separate bank accounts and operating agreements. It also outlines DC business registration requirements, property and income tax filings, and a cash versus accrual accounting overview to support accurate financial reporting.

LanguageEnglish

CategoryLetters

FormatPDF

Pages19

Reading Time7 min

AccessFree to download

Choice of Business Entity

Single Member LLC

Limited Liability Company or Partnership

S-Corporation

C-Corporation

Limited Liability Company (LLC)

Business Structure Pros and Cons

DC Business Registration

Property Tax Returns

Income Tax Filings

Accrual vs Cash Accounting

Accounting Concerns of the Small Practitioner Donna Mahan, CPA, Principal Robin Meisner Cameron, CPA, Principal E. Cohen and Company, CPAs 1 Research Court, \#101, Rockville, MD 20850 (301) [917-6200 | www.ecohen.com](917-6200 | www.ecohen.com) Choice of Business Entity a . Single Member LLC (SMLLC) b. LLC or Partnership c . S-Corporation d. Sole proprietor – no corporate shield – not recommended e . C-Corporation – double taxation – not recommended f. Recommendation: all entities should have separate bank accounts, records and EIN 2 Single Member LLC (aka “Disregarded Entity”) a . Sole ownership b. Separate legal entity, but does not have its own income tax return filing. i. Instead, the income and expenses are reported on your federal personal income return (Form 1040) via Schedule C 3 Limited Liability Company or Partnership a . Multiple owners, as documented in the Operating Agreement b. Offers flexibility with ownership changes and income allocations c . Separate income tax filing (Form 1065) i. Income or loss is passed through to the owners via Form K-1 d. The pass-through income is subject to selfemployment tax (~15%) e . Carefully review and sign operating agreements . Note that partnerships have unlimited personal liability. 4 S-Corporation a . Single or multiple owners, as documented in the Articles of Incorporation b. Separate income tax filing (Form 1120-S) i. Income or loss is passed through to the owners via Form K-1 c . The pass-through income is NOT subject to self-employment tax i. However the owners must receive a reasonable salary (via W-2) which is subject to standard payroll tax d. Distributions – must be reasonable and equal to ownership %’s e . Owner’s health insurance and personal usage of automobiles must be reported as W-2 income, if applicable 5 Business Structure Pros and Cons | ENTITIES | PROs | CONs | | --- | --- | --- | | Sole
Proprietor | • Inexpensive and simple
• One level of tax
• No separate tax return | • Unlimited personal liability
• Ownership limited to one person | | Partnership | • Ownership not limited to one person
• One level of tax on net income
• Income and expenses allocation can be unrelated to percentage of ownership | • Unlimited personal liability
• Responsible for business actions of other partners
• Requires separate tax returns | | S Corporation | • Limited personal liability for shareholders
• Business net income taxed as personal income of shareholders | • Requires separate tax returns
• Restrictions on adding investors
• Net income allocated according to percentage of ownership | | C Corporation | • Limited personal liability for shareholders • Easy to transfer ownership/add investors • Perpetual continuity presumed | • Requires separate tax returns
• Net income may be double taxed
• More costly to set up and maintain | | Limited
Liability
Company (LLC) | • Limited personal liability for members
• Income and expenses can be allocated in a manner unrelated to percentage of ownership | • Not automatically perpetual like S or C corps
• Cost to set up and maintain | 6 DC Business Registration a. [https://otr.cfo.dc.gov/page/new-business-registration](https://otr.cfo.dc.gov/page/new-business-registration) [b. You will need your federal ID number and/or SSN](b. You will need your federal ID number and/or SSN), legal form of business, and business address c . All domestic and foreign filing entities are required to appoint and maintain a registered agent (includes LLCs, partnerships and corporations) i. Entities may act as its own RA if it has an office in DC ii. [https://dcra.dc.gov/book/corporate-registration](https://dcra.dc.gov/book/corporate-registration)faqs/corporate-registration-faqs-process 7 Property Tax Returns a . Due by July 31, 20XX b. Reporting the remaining cost as of July 1, 20XX c . Maintain detailed records of fix

FAQs

Which business structures are discussed, and how do they differ at a high level?

The guide covers Single Member LLC (disregarded entity), LLC or Partnership, S-Corporation, C-Corporation, and an LLC. It contrasts liability, filing requirements, and how income is reported to owners.

How does income taxation generally work for a Single Member LLC?

A Single Member LLC is described as a disregarded entity where the business does not file its own income tax return. Income and expenses are reported on the owner’s federal personal return (Form 1040) via Schedule C.

What is the main difference between cash and accrual accounting in this guide?

Cash accounting recognizes revenue and expenses when cash is received or paid, while accrual accounting recognizes revenue when earned and expenses when incurred. The guide notes that books are typically kept on accrual for a more accurate snapshot, while tax returns are usually on the cash method.

Sep 19, 2026

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